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Warranty Reminder by jigordon
September 28, 2008, 9:32 pm
Filed under: warranty

I had a conversation with a few folks the other day about warranties.

The end of the discussion was a reminder that just because a statement falls outside of the warranty section doesn’t mean that it’s not a warranty.

Warrants are promises.  Dictionary.com defines them as “something that serves to give reliable or formal assurance of something; guarantee, pledge, or security.”  The law.com defintion goes even further “a written statement of good quality of merchandise, clear title to real estate or that a fact stated in a contract is true. An “express warranty” is a definite written statement and “implied warranty” is based on the circumstances surrounding the sale or the creation of the contract.”

Which means that sometimes you’ll see them called “covenants” or “obligations” … but whatever the title, they’re still warrants, even with no title at all.

“But wait!”, said one person.  “We use section headers to delimit our contracts – so warranties are clearly sectioned off from the rest of the agreement.”

Hmmm… good thought.  But don’t you probably also have a section of your agreement where you state that section headers are for reference only and that they shouldn’t be used to interpret the agreement?  Oops.

They’re not discouraged.  “Not only that, but our warranty remedy language says that our warranty remedies only apply to the warranties listed in this warranty section.”

OK… now they might be getting somewhere.  The warranty remedy language probably gives a few “extra” remedies in the event of a warranty breach.  Most likely something along the lines of time to repair or replace the warranted good/service and avoid termination of the agreement.  Who does that remedy language benefit?  I would argue that it benefits the service provider.  Because it gives them the opportunity to stop a breach of contract claim (and thus one for damages) as a result of a warranty problem that they can fix.

But that also means that any of the OTHER warranties provided throughout the agreement not in your warranty section aren’t covered by this remedy language – and thus the only available remedy to “fix” the problem is a breach of contract claim (and probable termination).

What the warranty section is thus really for is to call out special warranties that should have extra protection – and thus extra damages.  The problem I see most frequently is that the “extra damages” portion of the remedy language is missing.

“Um, what do you mean, extra damages?” says the crowd.

Well, I mean that an uncured breach of these warranties should result in something more than termination of the agreement and a modest amount of damages.  In fact, in most cases, I argue successfully that the types of things I have in my warranty section (such as warranties of title/license, 4-digit-year processing, etc) should entitle me to a full refund of all fees paid in the event that the provider isn’t able to fix the problem.

“Holy cow!” shout the providers.  “Are you friggin’ kidding us?  We’re not going to give a full refund.”

Why not?  I’m entering into this agreement under the color of the promises that you’re making to me pre-contract.  You fully expect me to live up to my end of the agreement (you included language for payment, invoicing and penalties for late-payment).  So why shouldn’t I get to rely fully on your promises?

Just a thought.

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